FRANKFURT (Reuters) - German airline Lufthansa (>> Deutsche Lufthansa AG) has picked company veteran Carsten Spohr to succeed Chief Executive Christoph Franz when his contract runs out at the end of May, a person familiar with the matter told Reuters.

Handelsblatt Online earlier cited sources close to the company as saying Lufthansa would announce the appointment later on Friday.

Shares in Lufthansa rose 2.2 percent to 17.78 euros by 0910 GMT, making them the second-biggest gainer on a flat blue-chip DAX index <.GDAXI>.

Germany's largest airline has been looking for a new CEO since September, when it was announced that Franz would leave at the end of May to become chairman at Swiss pharmaceuticals company Roche (>> Roche Holding Ltd.).

Lufthansa declined to comment but the company has a history of promoting internal candidates to the top job. Supervisory board Chairman Wolfgang Mayrhuber, however, had said he was also considering external contenders.

German media last month said that Lufthansa had contacted the former chief executive of Deutsche Telekom (>> Deutsche Telekom AG), Rene Obermann, in its hunt for a new CEO.

The next scheduled meeting of the supervisory board, which appoints key executives including the CEO, is not until March 12, but it could call an extraordinary meeting to deal with the matter before then.

(Reporting by Frankfurt bureau; Writing by Maria Sheahan; Editing by Philipp Halstrick and David Goodman)